Thursday, April 23, 2009

With the recent announcement by Prime Minister (and also Finance Minister) Najib Razak, there will be no more 30% bumiputra equity requirement for 27 sub-sectors in the service industry with immediate effect, which covers the health and social services, tourism services, transport services, business services and computer and related services.

Rental/leasing services of ships that excludes cabotage and offshore trades

Rental of cargo vessels without crew (Bareboat Charter) for international shipping

Supporting and Auxiliary Transport Services

Maritime agency services

Vessel salvage and refloating services

This policy of 30% bumiputra equity requirement for companies listed publicly in Kuala Lumpur Stock Exchange (KLSE) and also for foreign companies that wish to operate in Malaysia has long be criticized by both local and foreign investors, and deemed as the major hindrance for them to invest and run business in Malaysia. It was also one of the major cause for certain existing investors to exit their business from Malaysia and gone to other places like Singapore, Vietnam, China, Thailand, etc.

Nevertheless, with effect from 17 June 2003, the 30% bumiputra equity requirement has been no longer applicable to all sub-sectors of manufacturing sector for foreign investors. It is good that another 27 service sub-sectors are free now.

Over the last decade, Malaysia has lost too much opportunities to neighbouring countries due to certain protective policies. This has been a barrier to the performance of KLSE as well as the economic growth of the country. I believe the bumiputra should have good wisdom to reason that instead of insisting on "guaranteed" 30% of a small cake, why not invite more investors to come in and make the cake grow bigger and bigger by releasing the restrictions on them? They might need to work harder to obtain a "non-guaranteed" 30%, but what you prefer? A "guaranteed" 30% of 100 or a "non-guaranteed" chance of 30% of 1000? Even in the worse case scenario, you only managed to get 10% of that 1000, it is still much much more better than the insisted 30% in the 100, isn't it?

Therefore, I view this move as a win-win-win situation, for the bumiputra, non-bumiputra, as well as the foreign investors. It would be better if the 30% requirement be totally scrapped for all sectors to bring back live to the KLSE as well as the economy activities.